China’s ZTE says US’ Cisco has ended deal

Chinese telecoms firm ZTE Corp (中興), accused by US lawmakers of doing business with Iran and posing a security threat, says US network giant Cisco Systems Inc has ended a cooperation deal with it.

In a statement late on Tuesday, ZTE confirmed media reports that Cisco earlier this year scrapped a 2005 strategic cooperation agreement that included purchases of equipment from the US company.

“In July 2012, Cisco informed the company [ZTE] that it terminated the strategic cooperation agreement entered with the company in 2005, mainly in relation to the company’s purchase of routers and other products,” ZTE said.

Soon after the agreement was signed, ZTE described the cooperation in far broader terms, saying it included jointly expanding in telecommunications markets in China and the rest of Asia.

ZTE in its latest statement said it would not be hurt by Cisco’s move since it had alternatives to the US firm’s equipment.

Media reports said the termination came after Cisco found ZTE had sold its equipment to Iranian companies in violation of US sanctions. A top ZTE executive denied the claims last month.

Cisco in China could not be reached for comment yesterday.

The announcement followed a US congressional investigation that concluded ZTE and another Chinese telecoms firm, Huawei Technologies Co (華為), pose a security threat to the US and should be barred from US contracts and acquisitions.

The report by the US House of Representatives’ Intelligence Committee, officially released on Monday, said the two firms “cannot be trusted” to be free of influence from Beijing and could be used to undermine US security.

ZTE said sales revenue from the US market was “relatively small” so any US moves would not hit its financial results, according to the statement issued through the Hong Kong stock exchange.

In a separate statement also released on Tuesday, China’s Commerce Ministry said China expressed its strong opposition and serious concern over the report.

“The US Congress investigation report, which is merely based on subjective suspicions and false foundations, has in the name of national security made groundless accusations against China,” Chinese Ministry of Commerce spokesman Shen Danyang (沈丹陽) said in the statement posted on the ministry’s Web site.

However, the congressional report has triggered a fresh wave of complaints against the firms, opening a second phase to the panel’s investigation.

A staff member of the intelligence committee said the panel has been receiving “dozens and dozens” of calls from current and former employees and customers reporting supposedly suspicious equipment behavior, chiefly involving Huawei.

“I don’t think the companies should expect our attention to stop,” the staff member said, adding that the panel would follow up on new leads.

The staffer was not authorized to speak publicly on the matter.

Adding to Huawei’s problems, Canada indicated on Tuesday that it would exclude Huawei from firms allowed to build a secure Canadian government communications network, citing possible security risks.

Canada has invoked a national security exception to let it discriminate, without violating international trade obligations, against companies deemed as too risky to be involved in putting together the network for carrying government telephone calls, e-mails and data center services, Canadian Prime Minister Stephen Harper’s spokesman told a news conference.